USD/CAD declines as Canadian Dollar strengthens on weak USD, OPEC’s decision

USD/CAD trades south of the 100-day Exponential Moving Average (EMA) as the Canadian Dollar (CAD) appreciated on oil supply shortages and a soft US Dollar (USD). The USD/CAD is exchanging hands at 1.3450 after hitting a daily high of 1.3536.

Dampened business activity in the US spurred recessionary fears

Wall Street portrays an upbeat sentiment. Two measures of factory activity in the United States (US), deteriorated, meaning a deeper economic slowdown is around the corner. The S&P Global Manufacturing PMI for March was 49.2, below 49.3 estimates. Later, the Institute for Supply Management (ISM) revealed its Manufacturing PMI, which plunged to 46.3, below the 47.5 foresaw and below February’s data.

Consequently, the greenback erased some of its earlier gains, bolstered by higher oil prices. The US Dollar Index (DXY), which tracks the buck’s value vs. a basket of six currencies, slides from 103.05 to 102.20, down 0.38%.

Hence, the USD/CAD dropped from around 1.3500 and registered a daily low of 1.3424 as traders began to price in a less aggressive US Federal Reserve (Fed).

The Organization of Petroleum Exporting Countries and its allies (OPEC+) announced over the weekend the cut of 1 million barrels of oil gave oil prices a leg up. WTI jumped over $6.00 from its Friday close at $75.68 to $81.00 a barrel.

The latest round of Fed speakers, led by the St. Louis Fed President James Bullard, said that OPEC’s decision would make the Fed’s job more difficult. Bullard reiterated that the Fed needs to raise rates above 5% and emphasized that his forecast is above the median.

On the Canadian front, the S&P Global Manufacturing PMI plummeted to 48.6 from the prior’s figure of 52.4, painting a gloomy economic outlook for Canada’s economy. Of late, the Bank of Canada’s (BoC) Business Outlook Survey (BOS) showed that around half of the firms surveyed expect the country to be in a mild recession. Additionally, 59% of businesses expect inflation above 2% until at least 2025.

USD/CAD Technical analysis

The USD/CAD tumbled below 1.3519, the 100-day EMA, which exacerbated a break below 1.3500. Although the USD/CAD pair reached a weekly low of 1.3424, the pair has recovered some ground as sentiment continues to deteriorate amidst recessionary scenarios. The USD/CAD neutral to downwards trend will continue if the pair stays below the 100-day EMA. A breach of the 1.3400 figure will expose the 200-day EMA At 1.3371. On the flip side, buyers reclaiming 1.3500 would pave the way to recover the 100-day EMA and beyond.